the circular flow of income 2.0 / 5 based on 1 rating ? EconomicsHow the macroeconomy worksASAQA Created by: Tanya HaldipurCreated on: 12-04-14 15:25 Economic models used to show the essential characteristics of complicated economic conditions in order to analyse them and predict the result of changes of variables. 1 of 14 Recession when an economy is growing at less than its long term trend rate of growth 2 of 14 Balance of payments exports minus imports - a deficit means more is imported than exported 3 of 14 flow measured over a period of time 4 of 14 stock a quantity measured at a particular point in time 5 of 14 injections money that originates outside the circular flow and so will increase national income/ output/ expenditure e.g. investment for firms 6 of 14 withdrawals any money not passed on in the circular flow and has the effect of reducing national income/ output/ expenditure e.g. savings 7 of 14 Investment spending by firms on buildings, machinery and improving the skills of the labour force 8 of 14 savings a withdrawal from the circular flow of income 9 of 14 income induced increases as income increases and decreases as income decreases e.g. savings 10 of 14 multiplier effect where an increase or decrease in spending leads to a larger than proportionate change in national income 11 of 14 net government spending the difference between government spending and taxation 12 of 14 fiscal policy the policy of the government regarding taxation and govt. expenditure 13 of 14 disposable income income available to households after the payment of income tax and national insurance contribution 14 of 14
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